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SIMON BROWN: I’m chatting with Steven Rosenberg, CEO at Sanlam Alternative Investments. Steven, I appreciate the time today. Let’s kick off with a sort of broad question around Sanlam and its role in the alternative investment space, and how you got involved in the particular space of alternative investments.
STEVEN ROSENBERG: Hi Simon. Sanlam Alternative Investments is part of the Sanlam Investment Group, and alternative investments is actually a key part of a group like Sanlam in the sense that alternative investment is an asset class. Apart from the huge impact that it contributes to the world, which I’ll get into, it is also a long-term asset class.
We, as part of a life insurance company, the Sanlam Group, are a long-term investor in these types of assets. So whether it be infrastructure projects or renewable energies, whether it be hospital or whether it be educational institutions, or whether it be lending money or an equity investment, we are a long-term investor in a whole range of these different types of investments. And that would be for our annuity portfolios, our pension fund investments, or our long-term liabilities. So we are a natural investor.
But it’s a very important part of our business. Our business is the alternative business. We want to know our purpose. We see ourselves as a business which wants to help build the African continent and make a sustainable difference in those economies in which we operate.
It’s so key because, as you know, Sanlam is the biggest non-banking financial institution on the continent. We operate in 27 countries in Africa plus India, and we have a long history of strong risk management and governance. So for us it’s a key investment. And as a key investor because of who we are we feel that that’s a competitive advantage as well for us in terms of attracting third-party investors to co-invest with us.
SIMON BROWN: I take your point. You mentioned two things. I was going to follow up to say, what’s the attraction of sort of alternative investments? Is it the uncorrelated returns? Is it the impact? But you mentioned it is around impact and it is around long term. As you say, you’re a long-term insurer. It meets that need and gets you away. Markets can be wild places. This is a sort of different psychology – investing in alternatives. You don’t get daily pricing; you don’t get daily mark to market. You’re going to chat with management, you’re going to get the cash flows rather than worry about day to day.
STEVEN ROSENBERG: I think there are a few points that go with that on one level – and this is a key part of those type of investors which are prepared to lock away money for 10 years, although there is often more liquidity then attached to these type of assets. So you would normally expect to get a little bit of a slightly higher return than you would get in the more listed type of assets. And, as you say, there’s a significant diversification; you are getting access to assets that you wouldn’t otherwise be able to get access to.
But that liquidity premium is quite an important component for the likes of a life company or a long-term investor like a pension fund. You don’t need access to funds as readily, so you are able to invest in these types of assets and gain a slightly better return which, compounded over many years, can make a significant impact on the lives of pensioners and policy holders.
But the other big attraction is obviously, as you mentioned, the impact. Many of our funds, many of our products and many of our investments are not only making a big contribution to the climate. We have a business within our alternative asset manager, within our alternative investments business, called Climate Fund Managers, which is both in the Netherlands and South Africa.
We are are also in various other places in the world like Singapore and Bogota. But the point is that it’s a climate fund investor. It’s making a huge impact in renewable energy projects in solar, in water, in hydrogen. So it’s part of the Just Energy [Transition] key initiatives, the hydrogen project that they’re looking at now in Namibia and in South Africa.
But then also in terms of the creation of jobs, a lot of our private equity and our private debt businesses have created a significant amount of jobs. We’ve got a beef business called Cavalier, which is a business that provides a lot of meat, most of the meat for Woolworths. It has created hundreds of jobs since we invested, and we play a strategic role in these businesses. I think that goes towards the investment return. You play such a significant role in the strategy of these businesses; you’re really involved at board level, at strategy level.
So you can make a difference in these businesses, which is often significantly more than what you might see in the listed space, where you would buy a business based on public information and then sell it when you think the time is right. You’re using your expertise and you’re adding value that often some other businesses, some of these businesses, may not have. That has certainly happened in a lot of the debt deals where we’ve contributed, where we have lent money.
SIMON BROWN: I take your point, particularly about the sort of impact you can have. You buy a listed company [and it’s] kind of like an AGM. You get there once year and you can vote on a few issues. Here much more hands-on.
You also talk around liquidity and it makes me think that, again, typically in investment, I’m looking to realise a traditional investment by exiting. In the alternative space is it actually more about the cash flow, perhaps. I’m thinking particularly infrastructural sorts of things – whether it be a hospital, renewable energy or a school. Cashflow rather than exits.
STEVEN ROSENBERG: Yes, it typically is around the cash flows more than the exits. But there is obviously pressure on, for example, a private equity fund. It’s a 10-year fund. You’ve got a quite a strong definite plan around when you raise your funds, when you will invest them, and when you will exit.
Good managers will plan their purchase along with the plan of their exit, if you know what I mean. They’ll have an exit plan, they’ll have a whole strategy around when to do what, how, and how to get to make sure they’re out by the end of 10 years for their investors. Often it’s a plan which is done with the business you buy, and you incentivise it on that basis as well, even with the company you’re buying.
SIMON BROWN: I take that. You sort of go in with the whole plan and strategy worked out.
We’ll leave it there. Steven Rosenberg, CEO of Sanlam Alternative Investments, I appreciate the time.
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